ASF Group Invests In Coking Coal Assets In Queensland

China-Australian investment house ASF Group (ASX:AFA) has added to its asset base by acquiring control of a coking coal portfolio of 27 Exploration Permits in Queensland.

The portfolio to be acquired includes prospective future hard coking, PCI and thermal coal projects ranging from potentially immediate to longer-term development timeframes.

ASF will acquire a 68.205% equity interest in private company Civil & Mining Resources Pty Ltd for $1,079,270.50 in a cash consideration.

Presently, the deal is at the Heads of Agreement stage, and will be funded by ASF out of internal resources, a final agreement is expected to close around November 15, 2013.

Note facility

ASF will also grant a convertible loan facility to CMR of up to $5 million over two years, which will be converted into shares of CMR at ASF's option.

If ASF does not elect to convert upon maturity, the convertible loan will be repayable, together with interest of 10% per annum. An initial advance of $150,000 has been made to CMR in accordance with the terms of the HOA.

CMR background

CMR Coal has a significant coal tenement portfolio, with a massive ~14,182km2 base, located throughout all the major coal-bearing basins in Queensland and are situated in close proximity to operating mines, infrastructure and proven economic coal resources.

Further details were not disclosed.

ASF Buy-Back program

Meanwhile, ASF is continuing to soak up shares with a buy-back program.

In February this year, ASF extended its on-market share buyback program, which in the past 12 months, bought back 10.1 million ASF shares at an average price of $0.1793 per share.

ASF expanded the Buy-Back to 30.4 million ASF shares to be acquired over the next 12 months as part of the buyback.

Analysis

This is a significant portfolio, which adds to an already deep trove of assets in Australia.

That CMR's portfolio of exploration permits is located throughout all the major coal-bearing basins in Queensland and are situated in close proximity to operating mines, infrastructure and proven economic coal resources is of interest.

ASF's recent acquisition of a 19.89% stake in Rey Resources (ASX: REY), which holds a large tenement holding in the Canning Basin, Western Australia is an example of the type of investment from Rey that is already bearing fruit.

As Rey's share price has been on the rise, up 121% since August, as it focuses on developing its oil, gas and coal interests in the Canning Basin.

Interestingly, Rey holds a 19.89% stake in the Fitzroy oil and gas Blocks which are located in the Canning Superbasin. Buru Energy (ASX:BRU) has a 37.5% holding.

The on-going buy-back of shares by ASF has tightened the capital structure, which we view positively. ASF had also $3.8 million in cash as at September 30 quarter end.

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